Asked by Annabelle Beauchamp on Jun 17, 2024
Verified
The presence of a learning curve may induce a decision maker in a startup firm to choose:
A) low levels of output to exploit economies of scale.
B) high levels of output to exploit economies of scale.
C) low levels of output to shift the average cost curve down over time.
D) high levels of output to shift the average cost curve down over time.
E) to produce more than one output.
Learning Curve
The graphical representation of how an increase in learning comes from greater experience, leading to reduced costs over time.
Average Cost Curve
A graphical representation that shows how the average cost of producing a good varies with the quantity produced, usually U-shaped due to economies and diseconomies of scale.
- Contrast the influence of learning curves with that of economies of scale on the expenses associated with production.
Verified Answer
JH
Joshua HicksJun 20, 2024
Final Answer :
D
Explanation :
The presence of a learning curve means that over time, the firm will become more efficient at producing the output, resulting in a lower average cost. Therefore, the best choice would be to choose high levels of output to take advantage of the economies of scale and shift the average cost curve down over time. Choosing low levels of output may not allow for the full benefits of the learning curve to be realized.
Learning Objectives
- Contrast the influence of learning curves with that of economies of scale on the expenses associated with production.